Finance Minister P Chidambaram on Wednesday said the current liquidity tightening, which has pushed up call money rates to nine-year high on Tuesday, will ease in a few days as departments start spending money.
Talking to reporters on the sidelines of the release of a report by UNESCAP, he attributed the present liquidity squeeze to advance tax payments.
"Liquidity (tightness) is mainly due to advance tax payments, it will be alright in a few days as the ministries, departments start spending money," he said.
The government has collected around Rs 40,000 crore (RS 400 billion) in advance tax payments in the last quarter of this fiscal ended March 15.
Liquidity squeeze pushed up call money rates to 60 per cent intra-day on Tuesday before they closed at 17 per cent. Some banks, particularly foreign and private, used dollars to raise rupee resources for a day at a record rate of 105 per cent.